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Banks’ Deposit Declines by N213bn

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  • Banks’ Deposit Declines by N213bn

BANKS’ deposit fell by N213 billion in December, reflecting impact of the economic recession on individuals and businesses. Meanwhile, Federal Government’s Bonds, FGB, recorded significant sell-off last week leading to a fall in prices in both the OTC platform and the Eurobond market.

Banks are mandated to keep 22.5 percent of their total deposit as Cash Reserve with the Central Bank of Nigeria (CBN). Consequently, the apex bank, on a monthly basis, debits banks for 22.5 percent of any increase in bank deposit for the month.

However, if a bank records decline in deposit, the CBN credits the bank 22.5 percent of that decline in deposit.

Financial investigations reveal that last week, the CBN credited banks N48 billion for CRR for the month of December, implying that banks in the country recorded a decline in deposit to the tune of N213 billion.

Earlier in June 2016 the Financial Stability Report of the CBN for half year 2016, stated that “Banks’ deposit with the CBN fell by 12.50 per cent at end-June 2016, compared with the 3.84 per cent decline at the end of the second half of 2015.

The Report had indicated that banks’ deposit fell to N3.69 trillion at the end of June 2016, from N3.95 trillion at the end of December 2015. Similarly, the share of banks’ deposit in the total deposit with CBN fell to 35.1 percent in June 2016 from 42.3 percent in December 2015.

N84bn inflow moderate cost of funds

Meanwhile cost of funds dropped to previous level after rising by almost 100 percent during the week. From 7.0 percent at the opening of business on Monday, short interest rates (Overnight borrowing and Open Buy Back, OBB) rose sharply to 14 percent by midweek following outflow of N222 billion for purchase of treasury bills. This was further compounded by outflow of another N2.2 billion for foreign exchange purchase. Hence market liquidity fell from N174 billion on Monday to N17 billion on Wednesday.

Market liquidity

Market liquidity was however revived due to inflow of N84 billion comprising N48 billion for CRR credit and N36.7 billion inflow from excess crude reserve. The inflows prompted market liquidity to rise and close at N56 billion.

Meanwhile the CBN will sell N195.9 billion worth of treasury bills this week in continuation of its effort to manage excess liquidity in the interbank money market. These comprise N36.77 billion worth of 91 Days bills, N39.17 billion of 182 Days bills and N120 billion worth of 364 Days bills. However due to inflows from payment of maturing bills of similar tenors and value, as well as inflow from statutory funds, the interbank money market is expected to be liquid this week with relative stability of cost of funds.

Investors dump FGN Bonds

Last week was a reversal of fortunes for federal government bonds, as there was massive sell-off by investors in Over-The-Counter (OTC) segment and the Eurobond segment.

According to analysts at Cowry Asset, a Lagos based investment firm: “In the just concluded week, FGN bonds traded at the OTC segment depreciated in value for all maturities amid sell pressure. The 20-year, 10.00 percent FGN July2030 debt10-year,16.39 percent FGNJAN2022debt, the7-year16.00 percent FGNJUN 2019 debt and the 5-year, 15.10 percent FGNAPR2017 debt depreciated by N0.67, N0.38, N0.39 and N0.14 respectively; theircorresponding yields rose to 16.30 percent (from 16.13 percent), 16.41 percent (from 16.24 percent), 16.37 percent (from 16.17 percent) and 14.82 percent (from 14.38 percent) respectively.

Elsewhere, FGN Eurobonds traded on theLondon Stock Exchange decreased in value across allmaturities amid sell pressure.The 10-year, 6.75 percent JAN28,2021bond, the5-year,5.13 percent JUL12,2018bondand the10-year,6.38 percent JUL12,2023bondlostUSD0.15 (yield rose to 5.75 percent),$0.35 (yield rose to 3.45 percent) and$0.32 (yield rose to 6.42 percent) respectively. This week, we expect a mix of bargain hunting and profit taking at the OTC market.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Finance

Global Credit Rating Affirms Sovereign Trust Insurance A Rating

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Global Credit Rating Affirms Sovereign Trust Insurance A Rating

Global Credit Rating, an international rating agency based in South Africa, has affirmed Sovereign Trust Insurance Plc A rating in its latest report released for the month of December 2020.

In a statement released through the Nigerian Stock Exchange (NSE), Global Credit Rating noted “that the Company has shown a great deal of consistency in her claims paying obligations to her numerous customers spread all over the country.

The Report further stated that “the listing of the Rights Issue in 2019 helped in increasing the Shareholders’ funds of the Company by 33.8%, to N7.8b by the end of the Financial year in 2019 as against the figure of N5.8b in 2018.

“Subsequently, by the third quarter of 2020, the Shareholders’ funds had increased to N8.2b which also translated to a 31% increase in the corresponding period of 2019 with a figure of N6.3b. In the Rating Agency’s opinion, Sovereign Trust Insurance Plc is strong in liquidity with more than adequate claims coverage that compares well to industry averages.

“The capital adequacy of the Underwriting Firm is considered strong according to the rating report and this is underpinned by the sizeable capital base catering for the quantum of insurance and market risks assumed. In this regard, the ratio of Shareholders’ funds to NEP, (Net Earned Premium) improved to 189.2% in the Q3 of 2020 as against 130.9% in the corresponding quarter of 2019.

In terms of peer-to-peer performance comparison, “Sovereign Trust Insurance Plc did very well when compared with other selected insurers in terms of Capital, Total Assets, Gross Premium Income (GPI) and Net Premium Income (NPI).”

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Banking Sector

Sub Saharan Africa Mergers and Acquisition Transactions Totalled US$ 25.7 Billion in 2020

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Sub Saharan Africa Mergers and Acquisition Transactions Totalled US$ 25.7 Billion in 2020

South Africa – Refinitiv today released the 2020 investment banking analysis for the Sub-Saharan African. According to the report, an estimated US$523.7 million worth of investment banking fees were earned in Sub-Saharan Africa during 2020, down 15% from 2019 and the lowest annual total in six years.

Fee declines were recorded across M&A advisory, debt capital markets underwriting, and syndicated lending.  Advisory fees earned from completed M&A transactions generated US$108.3 million, down 55% year-on-year to the lowest level since 2013.  Debt capital markets underwriting fees declined 13% to US$64.9 million, a four-year low, while syndicated lending fees fell 3% to US$263.0 million. Equity capital markets underwriting fees totalled US$87.5 million, almost three-times the value recorded during 2019.

Fees generated in the energy & power sector account for 26% of total investment banking fees earned in the region during 2020, up from 10% during the same period last year, while the financial and technology sectors account for 17% and 13% respectively.  South Africa generated the most fees in the region, a total of US$279.9 million accounting for 53%, followed by Mozambique with 14%. Boosted by lending fees, Sumitomo Mitsui Financial Group earned the most investment banking fees in the region during 2020, a total of US$57.3 million or an 11% share of the total fee pool.

MERGERS & ACQUISITIONS

The value of announced M&A transactions with any Sub-Saharan African involvement reached US$25.7 billion during 2020, 62% less than the value recorded during 2019 when Naspers’ US$35.9 billion internet assets spin-off boosted merger activity to an all-time high.  The value of deals recorded during 2020 is the lowest annually since 2012.  The number of deals declined 5% from last year to a seven-year low.

The value of deals with a Sub-Saharan African target declined 39% to a sixteen-year low of US$12.5 billion as domestic M&A within the region declined 44% from last year and the combined value of inbound deals reached just US$7.1 billion, the lowest annual total since 2009.

Chemicals company Sasol agreed to sell a US$2.0 billion stake in LyondellBasell in October, the largest deal in the region during 2020.  Boosted by this deal, materials was the most active sector for deal making during 2020, accounting for 23% of Sub-Saharan African target M&A activity, followed by energy & power (19%) and technology (17%).  South Africa was the most targeted nation, followed by Uganda. Outbound M&A reached a three-year high of US$6.0 billion during 2020, 13% more than the value recorded during 2019.  The value was boosted by Angolan state-owned Sonangol’s purchase of PT Ventures from Africatel Holdings for US$1.0 billion and Templar Investments’ US$1.0 billion offer for Jindal Steel’s Oman unit. With advisory work on twenty deals worth a combined U$4.4 billion, JP Morgan holds to the top spot in the financial advisor ranking for deals with any Sub-Saharan African involvement during 2020.

EQUITY CAPITAL MARKETS

Sub-Saharan African equity and equity-related issuance reached US$2.5 billion during 2020, 54% more than the value recorded during the previous year, but lower than every other annual total since 2005.  The number of deals recorded increased 19% from 2019 but was lower than any other yearly tally since 2012.  One initial public offering was recorded during 2020, compared to three in 2019.  Malawian telecoms company, Airtel Malawi, raised US$28.7 million on the Malawi Stock Exchange in February. JP Morgan took first place in the Sub-Saharan African ECM underwriting league table during 2020.

DEBT CAPITAL MARKETS

The African Development Bank raised $3 billion in a “Fight Covid-19” social bond at the end of March to help alleviate the economic and social impact the Coronavirus pandemic will have on livelihoods and economies in the region.  With this deal, and Ghana’s US$3 billion Eurobond in February, Sub-Saharan African debt issuance totalled US$8.9 billion during the first quarter of 2020, the second-highest first quarter DCM total in the region of all-time.  Only US$1.9 billion was raised during the second quarter, the lowest quarterly total in eight years, followed by US$4.0 billion during the third quarter.  Prosus raised US$2.2 billion in December, boosting fourth quarter bond issuance in the region to US$4.3 billion.  The total proceeds raised during 2020 is US$19.0 billion, down 30% from last year and a four-year low.

Deutsche Bank took the top spot in the Sub-Saharan African bond underwriter ranking during 2020 with US$2.6 billion of related proceeds, or a 13% market share.

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Finance

DF Holdings Limited Purchases 474,603,596 Shares of AIICO

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AIICO insurance

DF Holdings Limited Purchases 474,603,596 Shares of AIICO

A majority shareholder in AIICO Insurance Plc, DF Holdings Limited, has increased its stake in the company by purchasing additional shares of 474,603,596.

In a disclosure statement published through the Nigerian Stock Exchange (NSE) and signed by Donald Kanu, the Company Secretary, AIICO, DF Holdings Limited purchased the shares on 31, December 2020 from the Nigerian Stock Exchange in Lagos Nigeria.

The 474,603,596 shares were purchased at N1.17k per share. Meaning, DF Holdings Limited invested N555.286 million in AIICO Insurance. See the details below.

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